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SAVCOR GROUP LIMITED (SAV)

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SAVCOR GROUP LIMITED (SAV) Events

Company (Stock Code)	Date/Time	Event	Timezone: Australia/NSW
SAVCOR GROUP LIMITED (SAV)	Wed, 27 Aug 2008 09:30AM	SAV - Half Year 2008 Results - Mr Hannu Savisalo, CEO
SAVCOR GROUP LIMITED (SAV) Synergistic Acquisition to Deliver Opportunity for Savcor	Thu, 31 Jul 2008 11:45AM	SAV - Acquisition in Structural Monitoring Market - Mr Atef Cheaitani, Chief Technology Officer
SAVCOR GROUP LIMITED (SAV) Manufacturer of Choice for two Leading RFID Companies	Thu, 24 Jul 2008 10:00AM	SAV - Acquisition in RFID Industry & Company Update - Mr Hannu Savisalo, CEO
SAVCOR GROUP LIMITED (SAV)	Fri, 29 Feb 2008 10:15AM	SAV - Full Year Results 2007 - Mr Hannu Savisalo, CEO
SAVCOR GROUP LIMITED (SAV)	Fri, 10 Oct 2008	Date Payable
SAVCOR GROUP LIMITED (SAV)	Wed, 1 Oct 2008	Record Date
SAVCOR GROUP LIMITED (SAV)	Thu, 25 Sep 2008	Ex Div Date
SAVCOR GROUP LIMITED (SAV)	Tue, 19 Aug 2008	Interim Results
SAVCOR GROUP LIMITED (SAV)	Fri, 23 May 2008 03:00PM	Annual General Meeting Christie Corporate Centre, Mt Kilimanjaro Room, Level 4, 100 Walker St, North Sydney, NSW
SAVCOR GROUP LIMITED (SAV)	Tue, 22 Apr 2008	Full Year Results
SAVCOR GROUP LIMITED (SAV)	Fri, 29 Feb 2008	Full Year Results
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SAVCOR GROUP LIMITED (SAV)

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INTERVIEW WITH HANNU SAVISALO, MANAGING DIRECTOR OF SAVCOR GROUP LIMITED (SAV)

“Manufacturer of Choice for two Leading RFID Companies”

http://www.brr.com.au/event/48072

 

THURSDAY, JULY 24, 2008, 10:00 AM.

 

BRR Today Boardroom Radio speaks with the Managing Director of Savcor Group, Mr. Hannu Savisalo. Welcome to Boardroom Radio, Hannu.

10 SAV Thank you.

 

BRR Hannu, Savcor has announced today it is accelerating its growth strategy in the RFID market. Your entry into the RFID market is a natural extension of your existing operations. Can you firstly give us some more details on what

15 RFID is and the potential market size and some of the applications for the technology?

SAV RFID means radio frequency identification, and people know them mostly from the access cards. Everybody has an access card, and inside of that plastic foil, it is an RFID antenna. That is one of the first applications for RFID.

20 RFID is getting to two directions. First of all, it is handling its select small antenna which has a small computer in it, like a chip. In that chip, you can store information, you can feed information into that and you can read the information from that. Then, your imagination is only the limit where you can use that into. The market is going to two different directions. First of all, they

25 are copper antennas which are very, let us say, high end, higher cost and more difficult to manufacture. They could be very complicated and the chips inserted in those antennas can handle more information. So this high-end market of the RFID is directing to the medical applications, like it is handling a lot of different applications, whatever you can imagine. The Hong Kong

30 Airport, for instance, took that into use. They just abandoned the bar code. The bar code is the application which you are normally replacing with RFID. The other direction is, of course, to the big-volume market where you attach the small antenna to every single item you sell, for instance in a store. It might be in a sausage or it might be in whatever you buy, might include the small

35 antenna in that. Of course, the price is, if you look at the medical applications where you control the access to the medicines or you control the medicine feed to the patient or everything, and there are applications where you basically prevent stealing from the shops. They are very different things. When you talk about small things, the antenna has to be very, very thin and

40 Savcor has been (inaudible) (0:02:38) with high-end antennas. We announced today our agreement with UPM Raflatac, the biggest manufacturer of RFID tags in the world, and that agreement is about manufacturing these high-end antennas to them. Now, when we bought the Intune company, we accessed to this low-end antenna production. Intune is

45 the first company in the world who started to produce antennas made of aluminum and started to do that in very, very high volumes, and we expect that (inaudible) (0:03:18) antennas are opening up the big market. Actually, I was asked as well what is the RFID market in general. It is a huge market. It is regarded by the industrial analysts and research companies to be something around 5 billion, said to be fivefold in less than 10 years. So, it is a big, big growth market. One of the quickest growing market areas in the world. It has been like that for some time, but we believe that now, the time for that big growth is on place.

5

BRR Hannu, you have touched on part of the strategic rationale behind the acquisition of Intune Circuits. Can you just tell us a little bit more detail about why you are actually acquiring Intune and how it will fit in with Savcor's existing business?

10 SAV It fits to our business very well. It is a similar type of process when we produce aluminum antennas as we do in Intune, so we produce that with the same way. We etch the antenna pattern, actually in Intune's case with aluminum out from aluminum foil, and we use a similar type of processes, what we used in Beijing when we produced a huge amount of mobile

15 telephone antennas. Part of the process is exactly the same. So how do we print the pattern onto the foil and how do we then separate the ready-made antenna from the foil and transfer that to the form which is suitable for the tag manufacturer? It is exactly the same process of what we are doing. The only difference is that with aluminum you need a different liquid, different type of

20 ways for the treatment and the whole chemistry is different. Otherwise, from the manufacturing point of view, it fits to our existing production plan. We do not need any new people. If we come to the conclusion that we will start that in Beijing, it fits to our existing building, so it is very, very complimentary to our product. Of course, the production today is in Finland and we have a little

25 bit of time to see what we actually bought. Then, if we think about doing some bigger changes to the production, we have to have negotiations with the unions. They might last, let us say, two months or something. If we come to the conclusion that the best way is to transfer the things to China, we will do that.

30

BRR Hannu, you have said that Intune is likely to contribute to EPS in calendar year 2010. Why will it take so long to contribute to the bottom line?

SAV It depends really on what our plans will be with the production. As it is, it is quite challenging to produce very, very low-priced antennas in a high-cost

35 country like Finland and it might take some time until we are on the road of doing the good profit out of that. We are expecting that if we would do that in the same production in China, we could reach the similar type of profit of what we do with other antennas as well, but it is a production plan and we have to do what we have to do, even to get it into China if we decide to do so with the

40 management and the employees of the Company.

 

BRR Hannu, you talked a little bit about the growth in the RFID market. Where is this growth likely to come from?

SAV RFID will grow to two different directions, to the more and more advanced

45 applications and as well to the direction of the very high volumes. We want to be in both of these directions involved. We have been in this high end, and now with the Intune acquisition, we very well covered the potential on the low-priced antenna which will be in the applications anywhere. You will see the antennas that do anything you handle in the future, and those antennas will most probably be aluminum which is what Intune is doing. On the other hand, the growth in our sales figures and maybe even the profit figures, they come from the more and more advanced antennas where we have to do real high resolution things and that part we cover with our agreement with the biggest

5 manufacturer of RFID tags, UPM Raflatac.

 

BRR Hannu, you have discussed your agreement with UPM Raflatac to manufacture the high-end antennas. Can you tell us a little bit more about this relationship with UPM Raflatac?

10 SAV With UPM Raflatac, we have signed an agreement for manufacturing but we as well have signed a memorandum of understanding about the cooperation in development and trying to get as close to UPM Raflatac as it is possible to be an independent company and serving as well their competitors. So we think that we could get involved with the research and development related to

15 RFID issues. We, of course, try to create our own know-how and our own research and development related to that issue. UPM Raflatac, as one of the most important customers, will of course give us a good feedback. I think having the open and good and close relationship with that kind of customer is very important. Of course, UPM Raflatac is the biggest producer of RFID tags

20 in the world so it is a big market and very important customer as well. When we talk about this agreement, it is related to the most difficult antennas that can be produced. As far as we understand, not so many companies in the world, maybe none, was able to produce this type of antennas which we are talking about in this issue.

25

BRR Hannu, as you mentioned, you do have a close relationship with UPM Raflatac. What are the next steps with Intune and UPM Raflatac now?

SAV In Intune, which we acquired yesterday, first of all, of course, we have had a quite long-lasting and very deep due diligence with them. However, when you

30 buy a company, so there are a lot of things you have to get acquainted with until you say too much. First thing is, of course, to look at how do we integrate their operations with ours and that might take some time. If we come, for instance, to the conclusion that we would take something to China or manufacturing to China, then we have to create some kind of stock for our

35 best customers. We could imagine that type of transfer from Finland to China, it takes some six months or something like that. UPM Raflatac now, we are already producing something to them and we are in the process of modifying our equipment and our processes to be ready for this most demanding tag manufacturing. That is business as usual today, and of course, we have to tell

40 the investors and everybody else that we have another big customer which is basically even bigger than UPM Raflatac in a certain type of antenna, related to the Intune production for instance. We try to be far enough so that relationship with the UPM Raflatac does not hurt anything else we work with and we have been doing that in mobile phone industry. We know exactly how

45 to work with different competitors without mixing things.

 

BRR Finally, Hannu, you have said in your announcement that you have rectified the manufacturing issues at your Guangzhou operation. Can you just explain in more detail some of the issues there?

SAV We built staring from last year and up until last March. We built a totally new factory in Guangzhou, the second one there, and that factory was just dedicated for the high, very glossy and very beautiful and demanding decoration purposes. We built the factory which we think is the best in the

5 world, so most of the operation happens in the clean room atmosphere. The clean room somewhere in the factory is as good as in the most demanding medical applications and medical manufacturing plants. We were a little bit too optimistic to think that we could just ramp up that factory in one month or so. Because the last machinery was installed in March, so we expected that

10 we could be in production sometime in April or May. Of course, we were a little bit confused when we did not get the quality which we expected in the beginning. It really hurt a little bit of our sales as well, so we work very determined for the goal. We went through with our outsiders, with the consultants, the best consultants in the world in the painting area because

15 part of the production is painting, really, all that gearing. We succeeded to just isolate those problem areas and then we removed them, so everything went fine. We feel that we have now the factory in full operation. We can do whatever we want to do there, and we have caught some orders there as well and it is producing. Of course, every single project has its own challenges,

20 but we see that we have left behind the ramp-up problems. Now, it is just the normal everyday challenges in what we do and nothing that we saw in April/May is left there. So we are just confident, so confident that we have started the sales of that new capacity and then it takes some time until the orders start to come in, as everybody knows. We expect to get some of the

25 big ones. We have their work, no question about that, but something which is important for us, we could expect to get something like in September.

 

BRR Hannu, the half-year result will be coming out shortly. Have you got any updates to the half-year result?

30 SAV I would like to comment, but I think it is premature. We are just behind the process of producing the management accounts and we have a board meeting on the 12th and 13th of August.

 

BRR Hannu, some great news out from the Company today. Savcor is now the

35 manufacturer of choice for two of the world's leading RFID companies. We appreciate the update and we do look forward to your half-year results coming out in August. Thanks very much for joining us today on Boardroom Radio.

SAV Sure.

40

BRR Remember, if you have any questions about this broadcast or any others, please feel free to send me an e-mail at brr@brr.com.au or via the Contact Us button on the home page. I am Terence Bell. Thanks for listening to Boardroom Radio.

 

INTERVIEW CONCLUDED

 

 

 

Contact brr@brr.com.au for more information

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